E3 - Enterprise Strategy Post Exam Guide May General Comments

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1 General Comments This examination paper was designed to test candidates ability to demonstrate their understanding and application of the following learning outcomes from the E3 syllabus: produce an organisation's value chain recommend how to interact with suppliers and customers evaluate strategic options evaluate the process of strategy formulation discuss the drivers of external demands for corporate social responsibility discuss the concept of organisational change evaluate approaches to managing change evaluate the role of change management in the context of strategy implementation evaluate different organisational structures recommend appropriate control measures advise managers on the development of information systems that support the organisation s strategic requirements recommend how to manage relationships with stakeholders evaluate alternative models of performance measurement Candidates are reminded that they must ensure they are familiar with the pre-seen material prior to the examination, as the unseen material for Question 1, presented to candidates on the day of the examination, builds upon this pre-seen information. An understanding of the context of the scenario organisation presented in the unseen and the main issues it is facing clearly helps candidates to gain a better understanding of the overall themes which may be tested within the unseen material. The Question 1 unseen scenario was designed to test a number of key skills, including both quantitative and qualitative analysis. The pre-seen is based upon P plc, one of the world s leading distributors of plumbing, heating and building materials employing over 35,000 people. It operates its own retail outlets and also sells directly to building and plumbing contractors and merchants through external direct sales units. The pre-seen also introduced the two operating divisions of P plc, one of which is the Building Materials (BM) Division, which sells concrete building blocks, bricks, tiles, flooring products, roofing materials and wooden roof beams and other timber, as well as UPVC products, such as doors and window frames to the building trade. The pre-seen material identified a number of areas relating to the E3 syllabus, including references to strategic objectives, corporate social responsibility aims and critical success factors (in particular, the focus upon high levels of customer service and customer satisfaction). The unseen material for E3 focused specifically upon the activities within the BM division. Within the unseen material, some of the areas introduced in the pre-seen material were further developed through information and questions relating to an evaluation as to how the primary activities of BM add value to its customers, and also evaluations of two potential strategic development options and the impact of the successful implementation of P plc s corporate social responsibility aims upon BM s own divisional strategy. Most candidates performed well on Question 1. Part (a)(i) was generally answered soundly as most candidates demonstrated a good understanding of the value chain and were able to apply it successfully to BM s primary activities. Candidates who failed this question did so mainly because their answers failed to adequately focus upon how the activities in BM s value chain added value to the customer. Part (a)(ii) was not well answered, as few candidates recognised the importance to BM of recognising the impact upon its customers of its supply chain management strategy. Many candidates answered part (b)(i) of the question very well, with a number scoring maximum marks. However, it was disappointing to see how many candidates failed to make a reasonable attempt at this question and also the number of candidates who demonstrated a very poor level of understanding and application of NPV analysis and the Profitability Index. This was a very straightforward NPV calculation and it is not acceptable that at this level candidates cannot demonstrate the ability to undertake an analysis such as this. Candidates are also reminded that calculations do and will occur in the E3 examination and that it is no excuse to not attempt the The Chartered Institute of Management Accountants 2014 Page 1

2 calculations because they failed to take a calculator into the examination. However, answers to part (b)(ii) were good and there was evidence of a high degree of application in candidates answers. Part (b)(iii) was generally well answered as most candidates made a reasonable attempt at justification of their recommendation based upon their previous analysis in parts (b)(i) and (b)(ii). Candidates answers to part (c) were mixed. Some candidates answered the question very well, focusing directly upon how the effective implementation of P plc's Corporate Responsibility aims could impact on the successful achievement of BM's divisional strategy, particularly focusing upon improvement of efficiency and levels of customer service. Question 2 was the least popular question in Section B of the examination and in general, most candidates who attempted this question did not perform well. Answers to part (a) were good in most cases, as candidates applied the scenario information reasonably well to the PESTLE model. However, answers to part (b) were generally weak, with most candidates demonstrating limited knowledge or understanding of the features of learning organisations. Similarly, answers to part (c) were also weak as few candidates had sufficient knowledge of learning organisations to discuss the benefits and barriers of this concept to D. Question 3 was a popular question with candidates and was well answered by most of those who attempted it. In part (a) many candidates demonstrated a sound understanding of Porter s generic strategies model and applied this knowledge well to the scenario. Part (b) of the question was also generally well answered by many candidates, again demonstrating a sound ability to use and apply the scenario information effectively. In part (c) many candidates demonstrated a very good level of knowledge and understanding of the benefits of e-business but very few correctly identified a suitable range of barriers to e-business for J. Question 4 was a popular question but, in general, was not well answered by most candidates. Part (a) was not answered well, with a significant proportion of candidates providing rather superficial answers which failed to adequately cover the range of issues which were identified in the scenario in relation to each stakeholder group. Part (b) was also not answered well, as most candidates failed to answer the question that had been set. Many candidates did not provide relevant actions, rather the outcomes of actions. A further weakness is that many candidates failed to justify the actions that they had presented, therefore failing to answer the question that had been set. Overall, candidates performed well in this examination. There was evidence of evaluation, skills and the application of syllabus knowledge in many of the answers. However, candidates must make sure that they answer the questions set, as there were several examples within this examination where candidates failed to be awarded marks because they failed to do this or they failed to write answers which were of suitable depth or adequately developed. Candidates must also make sure that they continue to apply the scenario information as much as possible within their answers. The Chartered Institute of Management Accountants 2014 Page 2

3 SECTION A 50 MARKS ANSWER THIS QUESTION Question 1(a)(i) Evaluate the primary activities undertaken by the Building Materials Division (BM). Your answer should clearly explain how each of these activities should be organised to add value to BM's customers. Note: You should use Porter's Value Chain to structure your answer, but you are NOT required to draw the value chain as part of your answer. (12 marks) This question examines learning outcome C2(c) 'produce an organisation's value chain' and is designed to test candidates ability to apply and evaluate a strategic analysis tool. For requirement (a)(i) candidates are expected to apply the value chain model to the primary activities identified in the unseen material. Importantly, answers should be focused upon how these primary activities should add value to BM s customers. For each primary activity of the value chain well discussed and applied to BM Up to 3 Inbound Logistics - 40,000 suppliers wide range of choice / must hold adequate stock levels Adds value customers get products they want Need close supplier relationships/ fast turnaround Supplier management team adds value/ supply chain management system Outbound Logistics/ Operations Only a distributor no actual operations apart from accurate distribution & supply Requires customer focused operations Efficient and prompt distribution warehouse Stock local products adds value POS software adds value due to more accurate stock Sales and Marketing Range of methods to customers adds value through flexibility Website useful for marketing and review and reducing marketing costs Use of e-marketing add value through targeted marketing Service customer surveys value customer opinions adds value Service guarantees encourage loyalty Training in customer service adds value through competent staff 12 The Chartered Institute of Management Accountants 2014 Page 3

4 This question was reasonably well answered by most candidates. Many demonstrated a sound knowledge and understanding of the value chain model and it was encouraging to see that most answers were well applied to the scenario material. The candidates that scored highly on this question were those who clearly explained how the activities undertaken by BM added value to its customers and importantly, how the value chain should be organised to add further value to its customers. The weaker candidates were those who merely repeated the scenario material with little or no evaluation of the primary activities undertaken by BM or who made no attempt to evaluate the value added to customers. However, it was pleasing to see that very few candidates took this approach and that most candidates made a reasonable attempt at evaluating the material presented in the unseen material. Descriptive answers with limited evaluation of BM s primary activities Some candidates stated this adds value but failed to clearly explain how or why a given activity added value specifically to the customer Evaluation of the whole value chain and not just the primary activities The Chartered Institute of Management Accountants 2014 Page 4

5 Question 1(a)(ii) Discuss how BM can achieve an effective supply chain management strategy. (6 marks) This question examines learning outcome A1(e) 'recommend how to interact with suppliers and customers' and is designed to test candidates' understanding of the importance to BM of ensuring that the supply chain is effectively managed. For requirement (a)(ii) candidates must consider those factors which BM must focus on to achieve an effective supply chain strategy. Importantly, candidates must apply their knowledge of effective supply chain management, particularly in respect of the need to focus on BM s customers as part of the supply chain, as identified in the unseen material. Identifying sources of supply, transportation to its warehouses and then distribution/ how to make most effective Effective SCM Key to strategic objective of improving customer service Supply chain must maximise customer satisfaction Effective supply chain mgmt. should consider source/ number/ quality/ cost/ speed Emphasis on pull driven chain (focused on customers who pull products they need) Needs of customers drives relationship with suppliers and SCM strategy Highly competitive market supply chain must be customer focused Up to 2 Per point discussed 6 This question was not well answered. Most candidates failed to answer this question successfully, largely because they took a generic approach to answering it. Many answers were either focused upon a description of the stages of strategy development or alternatively upon the management of the information technology strategy in relation to the suppliers. Very few answers recognised the importance to BM of a customer driven relationship with its suppliers, to ensure a continued focus upon its strategic objective of high levels of customer service. Generic/ descriptive answers relating to strategic development No focus at all upon a customer driven supply chain The Chartered Institute of Management Accountants 2014 Page 5

6 Question 1(b)(i) For the two strategic development options being considered by BM: Calculate a. The Net Present Value and the Profitability Index for Option 1 b. The Net Present Value and Profitability Index for the Expected Value for Option 2 c. The Net Present Value for the worst case outcome for Option 2 (10 marks) This question examines learning outcome C1(b) 'evaluate strategic options'. For requirement (b)(i) candidates are expected to present the three NPV calculations required and the profitability index calculations for the two strategic development options. Answers should be clearly set out and presented as directed by the requirement. This should be a straightforward set of calculations. Net Present Value for Option 1 Profitability Index for Option 1 Net Present Value of the Expected Value (EV) for Option 2 Profitability Index of the EV for Option 2 Net Present Value for the Worst Case scenario for Option This question was well answered by many candidates. A number of candidates scored maximum marks on this requirement. However, this was expected as the calculations were very straightforward and should not have caused any problems for candidates at strategic level. However, it was very disappointing to see that there was a significant minority of candidates who scored badly on this requirement, largely through poor technique and a clear lack of understanding of the NPV and PI techniques. This is quite shocking at this level. Candidates should not be failing a question like this at the strategic level of the qualification. Some candidates included complicated tax adjustments, even though they were not instructed to do so. Many candidates demonstrated little understanding of the Profitability Index and many candidates made no attempt at this calculation at all. Candidates are reminded that in the E3 examination they can, and will, be examined on any technique which has been covered in previous syllabi and at previous levels of the qualification and they must be prepared to answer numerical questions in this paper. (A small number of candidates even noted on their examination papers that they could not do the calculation as they had not brought their calculators into the E3 exam!). Ensure you always bring your calculator to the E3 examination. Adjusting for an assumed tax rate No/ weak attempt at the PI Poor presentation of calculations The Chartered Institute of Management Accountants 2014 Page 6

7 Question 1(b)(ii) Discuss the potential benefits and difficulties for BM of undertaking each of the strategic development options. Your answer should include an evaluation of the calculations provided in part (b)(i) of your answer. (10 marks) This question examines learning outcome C1(b) 'evaluate strategic options'. For requirement (b)(ii) candidates are expected to undertake a discussion of the two strategic development options, taking into account the differences in the risks between the two and the differences in undertaking organic growth and acquisition. Importantly, answers must be directly focused upon the information provided in the unseen material. For each option well discussed (including a discussion of acquisition v organic growth) Up to 5 10 This question was reasonably well answered by many candidates. Most used the scenario material very well to evaluate the relative benefits and drawbacks of the two options outlined in the scenario. However, some candidates merely repeated the information presented in the unseen material with limited or no additional evaluation of the information. A minority of candidates ignored the additional information provided in the scenario and merely discussed the calculations presented in their answers to part (b)(i). Limited use of the information provided in the scenario Description rather than discussion of the information presented in the scenario The Chartered Institute of Management Accountants 2014 Page 7

8 Question 1(b)(iii) Recommend, with reasons, which of the two strategic development options should be undertaken by BM to achieve P plc's strategic objective 1. You should use your answers to parts (b)(i) and (ii) to support your answer. (4 marks) This question examines learning outcome C1(a) 'evaluate the process of strategy formulation' and is designed to test candidates' ability to make a well reasoned recommendation. For requirement (b)(iii) candidates are expected to provide a reasoned recommendation based upon the previous analysis. It is important that candidates provide reasoned and justified recommendations which correspond to their previous analysis. Recommendation Reasoning Up to 2 Up to 2 4 This question was well answered by those candidates who undertook parts (b)(i) and (b)(ii) effectively. Most candidates made a reasonable attempt at making a sensible justification of their recommendation. Candidates who failed this question did so largely because they failed to justify the recommendation they had made. The Chartered Institute of Management Accountants 2014 Page 8

9 Question 1(c) Discuss how the effective implementation by BM of any TWO of the key areas indentified in P plc's Corporate Responsibility aims (Pre-seen material page 5) can impact on the successful achievement of BM's divisional strategy. (8 marks) This question examines learning outcome A1(c) 'discuss the drivers of external demands for corporate social responsibility' and is designed to test candidates' knowledge and the impact of CSR activities on the achievement of overall objectives. For requirement (c) candidates are expected to discuss the link between the Corporate Responsibility aims of P plc and the achievement of BM s divisional strategy. Importantly, candidates should make sure that they choose only two of the corporate responsibility aims outlined and clearly discuss their potential impact upon BM s divisional strategy. Once again, a clear demonstration of the ability to apply answers to the scenario information is required in this answer. Any two aspects of the policy discussed - Must be focused upon achieving overall corporate strategy of maximisation of efficiency and high levels of customer service through CSR activities. 4 each 8 This question was generally not well answered. Many candidates failed to answer the question set. Some candidates incorrectly focused upon how the areas identified in the CSR aims should be implemented, rather than upon how their implementation would impact upon the achievement of efficiency and high levels of customer service. Most answers failed to address this successfully or adequately. Some answers also were too focused upon a description of the CSR aims within the pre-seen material. Again, this approach failed to answer the question that had been set. Lack of focus upon the impact upon efficiency and improved customer service Descriptive answers with little focus upon the achievement of BM s divisional strategy The Chartered Institute of Management Accountants 2014 Page 9

10 SECTION B 50 MARKS ANSWER TWO QUESTIONS FROM THREE Question 2(a) Evaluate, using the PESTLE framework, the factors which have contributed to D's strategic approach in meeting its business ethical challenges and corporate responsibilities. (12 marks) This question examines learning outcome B1(a) 'discuss the concept of organisational change' and is designed to test candidates' knowledge of the external environmental drivers of organisational change for D. For requirement (a) candidates are expected to apply the material provided in the scenario to the PESTLE framework. This should be a straightforward question but, importantly, the application of knowledge must focus directly upon the ethical and social responsibility challenges within D s environment. Political governments expectations and pressures/ fines/ legislation/ regulators Economic Growth/ recession/ developing economies/employees/ fair pay/ pricing Social - customer protection/ data protection/ content/ age of customers/ geographical social context Technological R&D/ internet capabilities/ 3G/ 4G/ Legal planning permission/ international laws/ EU framework/ tariffs Environmental health concerns/ positioning of masts/ R&D Up to 2 Per point well applied to D 12 This question was reasonably well answered, as most candidates made a reasonable attempt to apply the information from the scenario to a PESTLE model for D. The main weakness of answers to this question was that some were merely descriptive rather than evaluative. Some candidates failed to adequately evaluate the information presented within the scenario within the PESTLE framework and instead merely rewrote the statements presented within the question within the areas of the PESTLE. Although this approach was awarded some marks, the higher pass marks were awarded to those candidates who made an attempt to assess the importance of these environmental factors upon D s strategic approach. Some candidates also failed to adequately focus their answers upon the ethical challenges within D s environment. The question clearly asked candidates to focus upon the environmental factors which have affected D s approach to meeting its business ethical challenges. Those answers which failed to address these challenges were not awarded a pass mark. Descriptive answers rather than evaluation of D s environmental factors Lack of evaluation of the factors affecting D s ethical challenges and corporate responsibilities The Chartered Institute of Management Accountants 2014 Page 10

11 Question 2(b) Discuss the concept of a learning organisation, in the context of D. (6 marks) This question examines learning outcome B2(a) 'evaluate approaches to managing change' and is designed to test candidates' knowledge of learning organisations as a concept within organisational change management. For requirement (b) candidates are expected to demonstrate their syllabus knowledge of learning organisations. Facilitate learning Transforms continuously Skilled at acquiring and creating knowledge Modifying itself from new knowledge For D highly competitive thus learning imperative Innovation in many areas technology, structure, culture and systems Employees must embrace change and new knowledge 1 per correct point 6 Examiner's Comments This question was not well answered. This was largely due to most candidates clearly not having sufficient syllabus knowledge in the area of learning organisations. Many answers focused upon a description of knowledge management instead, which was awarded some credit but was not sufficient in itself to gain a pass mark. Most answers made no attempt at all to apply the concept of a learning organisation to D. Descriptive answers with little application to D Lack of syllabus knowledge of the concept of learning organisations The Chartered Institute of Management Accountants 2014 Page 11

12 Question 2(c) Discuss the benefits for D and the barriers it will need to overcome in becoming a learning organisation. (7 marks) This question examines learning outcome B3(a) 'evaluate the role of change management in the context of strategy implementation' and is designed to test candidates' understanding of the practical application of a learning organisational model to D. For requirement (c) candidates are expected to apply their knowledge of learning organisations directly to D. It is important that candidates provide a range of applied benefits and barriers and should attempt to provide a balanced answer. For each benefit applied to D For each barrier applied to D Up to 2 Up to 2 7 Examiner's Comments This question was generally not well answered, largely due to candidates' limited knowledge and understanding of learning organisations, as mentioned previously. Answers were better applied in this requirement than in part (b) and most candidates did make some attempt to use the scenario information in their answers. In particular, many candidates recognised the structural and cultural barriers within D, from the information presented in the scenario. However, the benefits were not as well discussed, with most candidates again focusing largely upon the generic benefits of knowledge management rather than upon the specific benefits to D, such as being better able to respond to the external environmental challenges (as discussed in part (a) of the answer) and the improvement in quality of output and company image. Lack of application to D, particularly when discussing the benefits of becoming a learning organisation Lack of syllabus knowledge of the benefits of a learning organisation approach The Chartered Institute of Management Accountants 2014 Page 12

13 Question 3(a) (i) Explain which of Porter's generic strategies J is following. (2 marks) (ii) Explain the extent to which this generic strategy has influenced the way the business is structured and operates. (4 marks) This question examines learning outcome C1(c) 'evaluate different organisational structures' and is designed to test candidates' understanding of the relationship between organisational strategy and structure. For requirement (a) candidates are expected to demonstrate their knowledge of Porter s generic strategies model and be able to directly apply this to the scenario organisation. (i) Explanation of low cost strategy Applied to J (ii) How cost leadership impacts on J's structure: Own team/design location - efficiency all in one location/in-house Production offices - located near key suppliers to maximise efficiency Does not own factories - minimise asset base Leased premises - allowing for increased flexibility and responsiveness 1 1 Up to 2 per point explained 6 (i) Most candidates answered this question correctly, recognising that J was following a cost leadership strategy. All of the information in the scenario pointed to this generic strategy (as discussed in the answer to part (ii)) being applied by J. However, a number of candidates suggested that J was following a differentiation strategy. This assumption was based upon offering 10 design seasons instead of the standard 4. Candidates were given credit for this in part (i) of the answer but it was then difficult for these candidates to gain additional justification marks in part (ii) of the answer, as the rest of the scenario information clearly pointed to J being a cost leader. Some candidates failed to clearly state which generic strategy J was following, instead describing the generic strategies Choice of differentiation strategy but not clearly justifying this with the number of design seasons The Chartered Institute of Management Accountants 2014 Page 13

14 (ii) Most candidates answered this question well. Many of those who had already correctly identified a cost leadership strategy in part (i) of the answer were then able to justify this choice, using the range of points highlighted in the marking guide above. However, candidates who had identified a differentiation strategy in part (i), then struggled to justify this in this part of the question, other than stating that the number of design seasons was different from other clothing retailers. Some candidates attempted to justify the location of the production offices and leased premises in support of a differentiation approach but these answers were often very weak and poorly justified. Attempts to justify a differentiation strategy using factors which were clearly related to a cost leadership approach The Chartered Institute of Management Accountants 2014 Page 14

15 Question 3(b) Recommend, with reasons, THREE types of activity which should be undertaken by J's audit teams to ensure its outsourced manufacturers comply with the policies which form the basis of J's Code of Conduct. This question examines learning outcome D1(a) 'recommend appropriate control measures' and is designed to test candidates ability to make reasoned recommendations relating to control measures. (9 marks) For requirement (b) candidates are expected to use their knowledge and understanding of control to identify a range of appropriate audit activities that would apply to the policies within J s Code of Conduct. It is important that candidates provide reasoned recommendations for each of the policies identified. For each control activity recommended, discussed and justified: Health and safety activities - audit accidents, injuries, training, working conditions Environmental activities - monitor sustainability, environmental practices, legislation adherence Employment activities - audit child labour, wage rates, exploitation, spot checks Up to 3 each 9 This question was reasonably well answered. Most candidates correctly used the information relating to the policies within J s Code of Conduct to identify and discuss a range of audit activities for its outsourced suppliers. Most candidates correctly focused upon the three main areas within J s policy and were able to discuss a relevant range of suitable audit activities, including the monitoring of accidents, training policies, environmental practices, and employment practices in relation to fair pay and treatment of workers. Many answers were very comprehensive and very well applied to J. A minority of candidates took an incorrect approach to answering this question, focusing their answers upon the detailed process of the audit such as carrying out substantive testing and document testing, which largely missed the point of the question. Candidates were not being tested upon their knowledge of audit practices, but rather upon their ability to discuss the need for J to undertake relevant audit activities upon its outsourced suppliers. Common errors Answers which covered only a very limited range of audit activities on, for example, employment practices only for J s suppliers Generic discussions of audit procedures The Chartered Institute of Management Accountants 2014 Page 15

16 Question 3(c) Evaluate the benefits for J and the barriers it will need to overcome when undertaking long term investment in e-business to meet the needs of its customers in all the countries in which it trades. (10 marks) This question examines learning outcome D1(d) 'advise managers on the development of information systems that support the organisation's strategic requirements' and is designed to test candidates understanding of the impact of e-business upon organisational strategy. For requirement (c) candidates are expected to provide a range of appropriate benefits and barriers to J of undertaking e-business. Again, it is important that answers are applied directly to J. Each benefit of e-business, directly related to J Each barrier of e-business strategy, directly related to J Up to 2 Up to 2 10 This question was reasonably well answered by most candidates. In particular most candidates discussed a good range of benefits of e-business and most answers were well applied to J. The main weakness of answers to this question was the discussion of the barriers of e-business. Many candidates failed to really address this part of the question, identifying issues which were difficulties rather than barriers. For example, many candidates discussed the need to develop websites for multiple languages and cultures, but this would not be a barrier to J of carrying out an e-business strategy. Rather, it would be a technical design consideration for the developers. Similarly, many candidates discussed security issues and payment options for customers, but again, these are not barriers. Rather, they are potential design considerations but they would certainly not be factors which would cause J to reconsider or not go ahead with an e-business strategy. Common errors Incorrect focus of answers upon difficulties or design considerations rather than upon barriers of e- business to J The Chartered Institute of Management Accountants 2014 Page 16

17 Question 4(a) Discuss the importance of engaging the following stakeholders in the successful implementation of a Balanced Scorecard for C: (i) The doctors and nurses employed by C (ii) The patients and local doctors in the community (iii) The Hospital Board of C This question examines learning outcome A1(d) 'recommend how to manage relationships with stakeholders' and is designed to test candidates understanding of the importance of engaging with stakeholders when implementing a balanced scorecard. (13 marks) For requirement (a) candidates are expected to discuss the importance of stakeholder engagement in the successful implementation of a balanced scorecard. It is important that candidates apply their answers directly to the scenario stakeholders. Candidates should not attempt to apply the Mendelow matrix as this model is not appropriate to the question set. For each stakeholder group, good discussion of importance of and types of engagement Key to delivery/ their actions determine clinical & business processes and community & patient engagement/ communication/ participation Judge C on outcomes/ engagement in terms of needs & quality/ marketing and advertising/ views critical in customer performance Up to 5 per stakeholder Ultimate responsibility for delivery/ HB must lead/ believe in usefulness/ leadership/ must be committed/ particularly senior consultants 13 This question was reasonably well answered, although most answers did not cover a sufficient range of issues or depth of analysis to be awarded high pass marks. Most answers did correctly cover the main reasons for including the key stakeholders in the implementation of a balanced scorecard, in particular the importance of the doctors and nurses in accepting the balanced scorecard as these are the stakeholders who will be key to its successful day to day implementation and delivery. Many candidates also correctly recognised the importance of the patients and local community doctors involvement, particularly as they will be important in assisting in identifying levels of quality and customer satisfaction. The area which was least well discussed was the importance of the Hospital Board. Relatively few candidates correctly identified that the Hospital Board has the ultimate responsibility for the successful implementation and without its backing it is unlikely to be successful. Thin, undeveloped answers which lacked application to J Application of the Mendelow matrix with limited attempt at answering the question actually set The Chartered Institute of Management Accountants 2014 Page 17

18 Question 4(b) Recommend ONE action, with justification, and ONE performance measure for each of the four processes identified in C's strategy map, which would assist the Hospital Board in developing and implementing a Balanced Scorecard for C. (12 marks) This question examines learning outcome D1(b) 'evaluate alternative models of performance measurement' and is designed to test candidates understanding of the challenges of implementing a balanced scorecard. For requirement (b) candidates should focus their answers directly upon the processes identified within C s strategy map. It is important that answers focus directly upon actions and performance measures for each of the processes identified directly from C s strategy map. Answers must be directly applied to C. For each action (only one action for each of the processes in the strategy map) Plus Justification of each of the actions identified Each performance measure for each action Examiner's Comments This question was not well answered. Candidates seemed to struggle with identifying and justifying suitable actions, as most were not actions at all but rather outcomes of actions. For example, for the financial perspective, many candidates stated that J should increase profitability, but this is NOT an action. It would be the outcome of a successfully applied action, such as undertaking a process of reviewing the billing activities of the hospital to ensure accuracy and timeliness. Similarly, for the customer perspective many candidates stated the action to improve customer satisfaction, but again, this is not an action. Nor was this correctly applied to the C scenario. In the scenario, the customer perspective corresponded to the community and patient engagement process within C s strategy map and within this, it was clear that improved marketing and advertising was required. Therefore an appropriate action would have been to implement a customer satisfaction survey or undertake a marketing plan. However, very few candidates correctly applied their answer in this way, directly to C s strategy map. In addition, the performance measures presented by candidates were often weak and did not always directly correspond to the action identified. For example, some candidates correctly stated that an action for the staff development processes within C s strategy map could be to implement a bonus system based upon customer satisfaction ratings but then incorrectly identified a performance measure of number of staff training days, which clearly does not relate at all to the action. The main weakness of answers to this question was that many candidates applied a standard balanced scorecard model but failed to apply this adequately to the strategy map within the scenario. Candidates must make sure that they apply their answers to the scenario information and not make the scenario information fit their syllabus knowledge. Weak application to C s strategy map Poorly justified actions which clearly were not actions at all Performance measures which did not measure the actions identified The Chartered Institute of Management Accountants 2014 Page 18